Saturday, June 13, 2015

Notes on Freedom, Critical Thresholds and Growth Potential

Knowledge use diversity, and the freedom of choice it implies, have unexpectedly plateaued and begun a slow decline in the marketplace. Neither governments or business interests have acknowledged the fact they need to act quickly, in order to preserve economic complexity. Even though fiscal conservatism may have reached an impasse at state levels, that does not mean governments will be able to continue "business as usual" in terms of fiscal decision making processes.

In the meantime, knowledge use access and time based services will not remain stable in their present marketplace configurations. Fiscal policies will be limited even in the best of circumstance, as entitlement responsibilities continue to override both time based service formation and needed infrastructural adaptation for present income realities. Further, neither of these important issues have been adequately considered within the monetary context where they actually need to occur.

These are just several aspects of a critical threshold for labor force participation and economic access. Knowledge use needs to be approached from a broader perspective, in order to remain fully viable. As government budgets continue to pare back choices re knowledge diversity, individuals experience limits to freedom at a personal level. Professionals have fewer options to pursue intellectual challenges, while non professionals face health concerns from patterns of repetition in the workplace. Likewise, family members have fewer means to maintain personal identity and emotional stability. Less economic freedom means less ability to manage one's life, which only adds further stress at individual and system wide levels.

While central bankers, financiers and politicians receive much of the blame in times of economic uncertainty, rigid supply side circumstance plays a larger role for negative outcomes than is often recognized. Not every call for free markets is actually intended in terms of access and personal choice. Political freedom cannot be reasonably maintained without economic freedom, and it is also the responsibility of supply side interests to make certain economic freedom is not lost. Production reform in particular, needs to restore growth potential to services formation through the use of time arbitrage and knowledge use systems.

There is a counterintuitive aspect to time arbitrage. How so? Time arbitrage has the potential to immediately contribute to the positive side of the ledger for knowledge use, while fiscal policy has had little choice but to subtract from already existing resources in order to support knowledge. Knowledge diversity is vital for prosperity. Just the same, too much knowledge use potential now ends up on the scrap heap of history, in part due to already existing demands on fiscal policy.

What the supply side has missed thus far, are the vast societal positives which could be generated through more extensive knowledge use. Time arbitrage has the capacity to generate new wealth, through better coordination of production and services at local levels. However, even the self start mechanism of knowledge use systems requires plenty of organizational capacity, beforehand.

Coordination for knowledge use systems would need to occur among multiple disciplines, which presently have little incentive to directly interact with one another. One reason is simply the expense involved. Even though interdisciplinary efforts can mean tremendous payoffs, costs are generally too prohibitive, beyond the obvious exceptions of higher income level communities. And yet it is precisely lower income levels which need better access to economic diversity and complexity. Perhaps this explains why many local revitalization projects have proven insufficient, to generate productive activity for those who need it most. What if lower income levels had access to constructive ideas for economically diverse community, without the high costs which are normally required?

Even non rival ideas which are freely available, might not sufficiently contribute to economic complexity without adequate understanding on the part of those who wish to benefit from them. As Nick Rowe indicated in a recent post, non rival ideas are not necessarily easy to spread:

...the second person can't use that idea unless the first person communicates that idea to the second person. The first has to teach it, and the second has to learn it, and teaching and learning are (sometimes) costly. The cost of communicating the idea to the second person might even be greater than the cost of the first person coming up with the new idea in the first place. Sometimes it might even be cheaper to reinvent the wheel than to walk to the library. And the marginal cost of communicating the idea to the n'th person very probably will be greater than the cost to the first person of figuring out the idea.

Learning new means of economic organization is difficult...there's no getting around it. Just the same, productive economic complexity is a gift that keeps on giving - when and where it has occurred. There is a degree of serendipity to prosperous regions which is undeniable, and the social coordination they engender is worthy of replication, if at all possible. Quite understandably, the price of land reflects the random nature of serendipity and local coordination which has long since taken place. Instead of attempting to force greater densities into prosperous regions, it would better to generate economic complexity across a full range of population densities and land values.

If a limited marketplace in land based services were not problematic enough, the price effect is built into the cost structures of many existing institutions. For today's services providers, it's all about "location, location, location". The real estate valuations of prosperous cities - given their unique positioning for knowledge and services access - often appear as though "outpacing" the ability of local residents to keep up with costs of living. And yet the land which "seems" as though it should be further taxed to "compensate", is already occupied by many of the primary recipients of governmental taxation, i.e. the knowledge use structures which have not been sufficiently duplicated.

Perhaps the oddity of not for profit claims to geographic location was not so obvious, when Henry George became convinced that land prices were the primary cause of inequality and poverty. He wanted to know why poverty seemed to deepen, as society grew wealthier. Granted, it's not difficult to appreciate his logic. Even so, I suspect the lack of a sufficient marketplace for time value and knowledge use, as the real culprit for inequality - in terms of both economic access and land values. A lack of knowledge use in a large percentage of economic environments, raises the costs of knowledge use and services in the places where they do exist.

By restoring balance to knowledge use in economic life, land use valuations would come into better balance over time. Desirable regions which appear completely "out of reach" now, wouldn't quite seem that way, once many more places also become desirable to work, live and raise families.

When people learn to cooperate for diverse economic activity, the land on which they do so also gains in value. One could think of coordinated non random means for economic beginnings, as akin to any aspect of nature which deserves replication for further economic access, growth and wealth potential. Any time that replication has occurred in the past for naturally occurring resources, the result is commodities and products which are more affordable and accessible. The same could also be true, in terms of meaningful replication for services and knowledge use.